War-Time Financial Problems eBook

There was also the internal problem which arose because
some of the public and some of the banks took to the
evil practice of hoarding gold just at the wrong moment,
and consequently there was no available supply of
legal tender currency except in the shape of Bank of
England notes, the smallest denomination of which
is L5. It is known that our bankers had long
before pointed out to the Treasury that if ever a
banking crisis arose there would, or might be, this
demand for a paper currency of smaller denominations
than L5; this suggestion got into a pigeon-hole at
the Treasury and was deep under the dust of Whitehall
by the time experience proved how big a gap in our
financial armour had been made by its neglect.
If the L1 notes, with which we are now so familiar,
had been ready when the war broke out, or, still better,
if the Bank of England had been empowered and instructed
to have an issue of its own L1 notes ready, it may
at least be contended that the moratorium, which was
so bad a financial beginning of the war, might have
been avoided.

But this opening crisis was a short-lived matter,
and was promptly dealt with, thanks to the energy
and courage of Mr Lloyd George, who was then Chancellor
of the Exchequer, and saw that things had to be done
quickly, and took the advice of the City as to what
had to be done. The measures then employed erred,
if at all, on the side of doing too much, which was
certainly a mistake in the right direction if in any.
What is much more evident is the fact that not only
had there been no attempt to provide against just
such a jolt to our financial machine as took place
when the war began, but that, quite apart from the
financial machinery of the City, no reasoned and thought-out
attention had been given to the great problems of
governmental finance which war on such a scale brought
with it. There is, of course, the excuse that
nobody expected the war to be on this scale, or to
last so long. The general view was that the struggle
would be over in a few months, and must certainly be
so if for no other reason because the economic strain
would be so great that the nations of Europe could
not stand it for a long time. On the other hand,
we must remember that Lord Kitchener, whom most men
then regarded as representing all that was most trustworthy
in military opinion, made arrangements from the beginning
on the assumption that the war might last for three
years. So, while some excuse may be made for
our lack of financial foresight, it does seem to have
been the duty of those whose business it is to manage
our finances to have thought out a complete scheme
to be adopted in case of war if at any time we should
be involved in one on a European scale. Instead
of which, not only would it appear that no such endeavour
had been made by our Treasury experts before the war,
but that no such endeavour has ever been made by them
since the war began. All through the war’s
history many of the country’s mistakes have been
based on the encouraging conviction that the war would
be over in the next six months. This conviction
is still cherished to this day, and there can be no
doubt that if those who cherish it hold on to it long
enough they will come right some day.